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MACROECONOMIC REPORTMay 2020

ECONOMIC DIVISION

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ABSTRACT

Global growth has hit unprecedented depths of despair amidst COVID-19 withsubstantial risks of even more severe outcomes remaining. IMF’s World EconomicOutlook of April, 2020 projects global output in 2020 to contract by 3 per cent withoutput of advanced countries contracting more than emerging market and developingeconomies. Aptly called the month of “Global Lockdown”, April, 2020 saw majorindices of manufacturing and services across countries declining to record lows onthe back of supply-side disruptions. Global energy prices plunged, US unemploymentrates surged to double digits, Euro zone consumer confidence and UK retail spendingfell, signalling the onset of a demand crisis as well. This demand shock weighedheavily on commodity exporter countries as their currencies depreciated relativelymore sharply. Global financial markets dramatically sold-off equity and debt inMarch 2020 which led to crashing of benchmark equity indices and tightening ofbond yields before a modest recovery in April 2020. Governments and Central Bankshave responded by announcing stimulus packages and liquidity injections. On 12thMay, 2020, the Prime Minister of India announced a package of Rs. 20 lakh crore forthe country, amounting to 10 per cent of GDP, inclusive of all previous liquiditysupport by RBI and fiscal stimulus by the government.

Indian economy had begun to regain momentum with clear signs of uptick inconsumption and investment towards the end of Q3:2019-20, only to be halted byCOVID-19 that made government enforce country-wide lockdown in late March 2020.Green shoots had appeared with Index of Industrial Production (IIP), Index of CoreIndustries (ICI) and merchandize exports rebounding with positive growth inFebruary 2020 along with signs of revival in consumer sentiment. However, sharpnegative growth of merchandize exports and imports in March 2020 gave first signsof distress having already entered the country’s economic space. With the impositionof lockdown from 24th March, FY 2019-20 closed with a seven-day period ofeconomic inactivity. Besides trade, negative growth in IIP and ICI indices andparticularly the decline in electricity generation in March 2020, reflected theeconomic adversity of the lockdown.

As the lockdown continued, manufacturing and services activity came to a standstillin April 2020 resulting in supply side disruptions and demand falling tounprecedented lows that fed into PMI indices going into a free fall. A huge decline inrailways freight traffic for April 2020 gave clear evidence that economic inactivitywas indeed widespread both across regions and sectors. Agriculture and alliedactivities, however, showed continued resilience on the back of all-time productionhighs and huge buffer stocks of rice and wheat. Above normal rains predicted for2020-21 also boded well for agricultural production. Amid severe COVID-19 inducedsupply chain disruptions, harvesting and procurement operations gatheredmomentum with an active FCI and supportive railways increasing volumes oftransferred food grains. The overall inflation outlook remains benign with economicinactivity leading to a broad-based deceleration in price pressures, particularlyenergy.

On the external front, the rupee weakened against the dollar with sharp foreignportfolio investor (FPI) outflows. Yet, rupee outperformed its emerging market peersdisplaying a new found resilience in the forex market. Further, rupee depreciation didnot inflate crude oil import bill as its price crashed in global markets. However, gold

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imports turned costlier with gold price spiking, riding on the yellow metal’s safehaven appeal.

Fortunately, India's external sector has acquired resilience manifest in improvementin Balance of Payments (BoP) position despite being challenged by net FPI outflowsfor some time. A comfortable BoP rests on manageable current account deficit (CAD),prudent external debt and robust availability of foreign exchange reserves adequateto finance more than eleven months of imports. As a considerable drop in domesticeconomic activity significantly curtails imports, India’s current account balance maygenerate a small surplus in the first quarter of 2020-21. India’s CAD is alsosupported by low levels of external debt servicing.

RBI responded to the economic fallout of the lock down by significantly cutting therepo and the reverse repo to a greater extent to discourage banks from parking fundswith it. In addition, it flushed the Indian banking system with liquidity in April 2020.Banks responded by cutting their base lending rates and Marginal Cost of LendingRate (MCLR) but credit to commercial sector continued to see muted growth. Creditcreation was possibly limited by public holding more cash for meeting emergenciesand continued risk aversion of banks with their preference to invest in G-secs andpark excess funds with RBI. Yet, excess liquidity in the banking system remained high,showing up in the steepening of yield curve in April 2020. However, towards the endof April, as RBI conducted special OMOs, the yield on 10-year G-sec softened. Theclosure of six debt schemes of Franklin Templeton Mutual Fund sustained theelevated corporate bond yield that somewhat softened after RBI opened a specialwindow to meet with sudden demands for redemption.

Government of India has so far responded with two stimulus packages, first in lateMarch 2020 and another on 12th May, 2020. The Central government’s borrowingprogram for FY 2020-21 has been raised by more than half to Rs. 12 lakh crore.Subscription to market borrowings by FPIs is likely to be tepid if their present trendof selling-off India’s equity and debt paper were to persist. Further, continuedinjection of liquidity or surplus liquidity situation will ensure that interest cost ofgovernment debt remains low with continuous softening of yields on G-secs.

Indian benchmark equity indices recorded largest gains in April 2020 afterplummeting in March 2020, buoyed by optimism over lockdown easing in majorglobal economies, stimulus packages by Central Banks and governments, expandingbusiness activity in China and encouraging COVID-19 drug trial results in the US.IMF has projected India’s GDP growth in FY 2020-21 at 1.9 per cent and 7.4 percent a year later. Government is aware of the severity of lockdown on economicactivity in the country and is cautiously optimistic about the revival of growth later inthe year.

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Year on Year performance of Macroeconomic indicators:2020 vs 2019

Year-on-Year (YoY) improvement of the indicator.Year-on-Year (YoY) deterioration of the indicator.No change in Year-on-Year (YoY) performance.

All figures in percentage unless otherwise mentioned.a) Economic Activity (Domestic & global): Improvement indicates rise in production indices, foodgrain stock, exports growth,

imports growth, sales growth, consumption growth & vice versa.b) Inflation (Global and domestic): Improvement indicates fall in price & vice versa.c) Fiscal: Improvement indicates increase in capex and fall in revenue expenditure, Govt’s market borrowings, G-sec and TB

yields & vice versa.d) Money & Finance: Improvement indicates rise in credit growth, broad money, ECB registrations, FPI utilisation, net

purchase of forex, growth in equity indices and fall in policy and bank rates, bond yields, spot exchange rate & vice versa .e) External balance: Improvement indicates rise in forex reserves, net FDI, net FPI and fall in prices of crude, gold and REER

& vice versa.

MACROECONOMIC INDICATORS 2020 vs 2019 ( YoY Performance ) JAN_20 FEB_20 MAR_20 APR_20

Global economicactivity

JP Morgan Global Composite PMI 52.2 46.1 39.2 26.5Global fuel prices growth -4.4 -18.9 -46.7 -63.3Global base metal prices growth 6.8 -6.4 -11.9 -17.5

Domesticreal

economicactivity

Supply

Food-grain stock (lakh tonnes) 847.2 840.4 872.3IIP manufacturing growth 1.6 3.1 -20.6Eight core industries growth 1.4 7.1 -6.5PMI-manufacturing (index) 55.3 54.5 51.8 27.4PMI-services (index) 55.5 57.5 49.3 5.4Merchandize exports growth -1.7 2.9 -34.6 -60.3Merchandize imports growth -0.7 2.5 -28.7 -58.7

Demand

Electricity generation growth 3.1 11.4 -8.2 -29.9Petroleum products consumption growth 0.1 4.5 -17.8 -45.8Domestic sales growth of passenger cars -8.1 -8.8 -53.3Domestic sales growth of commercial vehicles -14.0 -32.9 -88.1Domestic sales growth of tractors 4.8 21.3 -49.9Fertilizer sales growth 28.7 29.8 -1.6 53.4

Inflation

Consumer Price Index (CPI)-headline 7.6 6.6 5.9CPI-food 13.6 10.8 8.8 10.5CPI-core 4.3 3.9 4.0Wholesale Price Index (WPI) 3.5 2.3 1.0

Fiscal

Gross Fiscal Deficit (per cent of 2019-20BE) 140.0 147.3Net tax revenue receipts (per cent of 2019-20BE) 60.5 67.6Goods & Srvices Tax (GST) growth 8.1 8.3 -8.4Revenue Expenditure (per cent of 2019-20 BE) 81.7 88.3Capital Expenditure (per cent of 2019-20 BE) 79.1 90.0Centre's gross market borrowings (Rs. lakh cr) 7.0 7.1 7.1 0.6State's gross market borrowings (Rs. lakh cr) 4.5 5.2 6.1 0.6Net Bank credit to Government (Rs. lakh cr) 50.1 49.8 49.1 54.210 year G-Sec yield 6.8 6.7 6.4 6.7364 days-TB yield 5.3 5.2 5.2 4.4

Money &Banking

CreditNon-food credit growth 8.0 6.9 6.7 6.7Growth in credit to MSMEs 1.0 0.6 1.1Growth in credit to NBFCs 32.2 22.3 25.9

MoneySupply

Broad money (M3) growth rate 11.3 10.2 8.9 10.7Demand deposits- Rs. lakh cr 15.5 15.8 17.4 15.9Currency with public - Rs. lakh cr 22.2 22.6 23.5 24.2

FinancialMarkets

MoneyMarket

Repo rate 5.2 5.2 4.4 4.4Reverse repo rate 4.9 4.9 4.0 3.75MCLR (1 Year) of SCBs 8.3 8.2 8.2 8.0Term Deposit Rate for one year above 6.3 6.2 8.0 5.9

BondMarket

10 Year Corporate bond yield 7.7 7.4 7.5 7.3ECB registrations (USD billion) 8.4 4.2 7.4FPI utilisation in G-Secs 71.3 72.9 53.9 55.2

ForexMarket

Net purchase/sale of Forex by RBI (USD billion) 10.3 9.1 -4.0 -0.3Spot exchange rate (INR/USD) 71.3 71.4 74.4 76.2

EquityMarket

Growth in Sensex 14.7 12.6 -14.3 -21.5Growth in NIFTY-50 12.7 10.2 -16.7 -23.4

External balance

Brent Crude Oil price (USD per bbl) 63.6 55.0 33.0 23.3Crude oil - Indian basket (USD per bbl) 64.3 54.6 33.4 19.9Gold price (USD per troy ounce) 1560.7 1597.1 1591.9 1683.2Real Effective Exchange Rate (REER) (index) 118.4 119.2 117.3 116.0Forex reserves (USD billion) 471.3 481.3 477.8 481.1Net FDI (USD billion) 5.8 2.0 2.9Net FPI (USD billion) -0.1 1.0 -16.2

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Global growth hits unprecedenteddepths of despair amidst COVID-19,substantial risks of even more severeoutcomes remain.

1.1 Global macroeconomic andfinancial landscape is witnessingunrivalled turmoil with NovelCoronavirus emerging as the biggestthreat to economic growth since the2008 financial crisis. The COVID-19induced shock is extremelyunconventional in terms of its size anduncertainty, with its impact dependenton hard to predict factors like systemicefficiency and intensity of socialdistancing measures, fallout of supplychain and financial market disruptionsalong side societal responsiveness.While human mortality is risingcontinuously the world over, necessarymeasures to contain the pandemic areresulting in unparalleled economic costsas well, thereby making policy responseto the crisis deeply challenging.

1.2 As per IMF’s World EconomicOutlook (WEO) (April 2020), the year2020-21 is projected to experience theworst recession since the GreatDepression, far worse than the GlobalFinancial Crisis, with global growthcontracting by 3 per cent. Cumulativeloss to global GDP over 2020 and 2021is estimated at around USD 9 trillion –greater than the economies of Japan andGermany, combined.

1.3 Growth in advanced countries,experiencing widespread and intensevirus spread, is projected to contractsharply by 6.1 per cent in 2020.Emerging Market and DevelopingEconomies (EMDE), facing multi-layered health, external, commodity andconfidence shocks are projected tocontract by 1.0 per cent in 2020.Excluding China, the growth rate for thegroup is expected to be (–) 2.2 per cent.

Fig. 1: Real growth across countries andcountry groups

Data Source: World Economic Report, April 2020Database (7th April).

1.4 April 2020 became the month of“Global Lockdown” with worldeconomic activity coming to a standstill,as pointed by surveys of purchasingmanagers. JP Morgan Global CompositePMI plummeted to 26.5 in April 2020,down by a record 12.7 points fromMarch 2020 and far below its record lowof 36.8 during the global financial crisis.Rates of decline in output, new orders,new export business, employment andbacklogs of work all registered newseries records in April 2020. The month-on-month drop in both theManufacturing Output Index (12.3points) and Services Business ActivityIndex (12.8) has been the steepest so far.

1.5 Real GDP in the US declined 4.8per cent in the first quarter of 2020, dueto contraction in consumer spending andstoppage of output. Unemployment ratesurged sharply to 14.7 per cent in April2020 as against 4.4 per cent in March2020, shattering the post-World War IIrecord of 10.8 per cent in 1982. Whileindustrial output contracted by 15 percent (YoY) in April 2020, retail salescontracted even more by 21.6 per cent(YoY).

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Fig. 2.A: PMI Manufacturing acrosscountries

Data Source: IHS Markit.

Fig. 2.B: PMI Services across countries

Data Source: IHS Markit.

1.6 The Euro Area witnessed slowergrowth of 1.2 per cent in 2019 vis-à-vis2018 (1.9 per cent), and is projected tocontract sharply by 7.5 per cent in 2020-21 by WEO. The Euro governmentestimated GDP growth for Q1:2020-21at (-)3.2 per cent. Manufacturing andservices PMIs in the Euro area hit recordlows in April 2020. Decline in consumerconfidence doubled while inflation camebelow the 0.5 per cent mark in April2020. UK’s industrial productiondeclined by 2.8 per cent in February2020, a consecutive decline sinceDecember 2019 and its retail salescontracted sharply by 5.8 per cent inMarch 2020. Like in the Euro Area, PMInumbers of the UK also registeredhistorical low numbers in April 2020,with its construction PMI moving to

single digit at 8.2 in April 2020 from39.3 in March 2020.

1.7 In Japan, the coronavirus impactwas delayed compared to other SouthEast Asian economies. While Japan'sindustrial production declined by 3.7 percent in February 2020, its exports,growing negatively in the previousmonths, crashed by 11.7 per cent inMarch 2020. In April 2020, COVIDimpact continued with consumerconfidence falling by 30 per cent andPMI Manufacturing declining, albeitmoderately, from 44.8 in March 2020 to41.9 in April 2020.

1.8 China, the initial epicenter of theoutbreak, saw a record low outputgrowth for the January-March quarter at(-)6.8 per cent. Industrial productiongrowth (YoY) picked up to 3.5 per centin April 2020 after declining by 1.1 percent in March and 13.5 per cent inFebruary 2020 respectively althoughproducer prices continued to be negative.Decline in retail sales has also fallen byhalf from (-)15.8 per cent (YoY) inMarch 2020 to (-)7.5 per cent in April2020. With exports growth turningsignificantly positive in April 2020 to3.5 per cent after three months of sharpdecline, China’s trade balance movedfrom deficit position in March (USD (-)6.8 billion) to a strong surplus position(USD 45.34 billion). Importantly, theimprovement in trade balance emergedfrom pick-up in activity and not adecline.

1.9 COVID-19 demand shock hasadversely impacted consumption acrossmetals and mining, as reflected inplunging global commodity prices.Energy sector which was alreadybattling a price crisis before the outbreakhas witnessed nose-diving of globalcrude oil prices and erratic natural gasprices over the prospects of large scaledrop in demand, especially from

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emerging economies. Crude oil pricesremained in a state of flux, with WTI(West Texas Intermediate) crude futuresmoving to unprecedented negativeterritory in the second half of April 2020.From January 2020 to April 2020,commodity prices fell by 29 per cent1with metals like copper falling about16.12 per cent and natural gas pricesdeclining by 36.63 per cent.

Fig. 3: Commodity price movements

Data source: IMF primary commodity price system.

1.10 This global shock would weighheavily on commodity exporters,particularly from emerging marketcountries, exacerbating the multi-layeredshocks of health costs and tighter globalfinancial conditions in these countries.Lower oil prices, at the same time, willsave resources for domestic absorptionfor oil-importing countries like India.

1.11 Amidst COVID-19, financialmarkets are demonstrating their oldestrule, “fear begets more fear”. Globalfinancial conditions tightened in March2020 with dramatic sell-offs in equitymarkets and widening of high-yield

1 Source: IMF primary commodity price system2 Source: Copper, grade A cathode, LME spot price,CIF European ports, IMF primary commodity pricesystem3 Source: Natural gas price index, IMF primarycommodity price system

corporate and sovereign spreads withmodest recovery in April 2020.

Fig. 4A: Global Equity Indices in 2020

Data Source: Thomson Reuters.

Fig. 4B: 10 yr G-Sec yields across countries

Data Source: Thomson Reuters.

1.12 Currencies of commodityexporters amongst emerging marketsand advanced nations have depreciatedsharply since the beginning of the year,while the US dollar and yen haveappreciated by about 3 per cent in realeffective terms as at end March, and theeuro by some 2 per cent.

1.13 Governments and Central Banksthe world over have deployed variousmeasures to stimulate the economythrough liquidity support and regulatorychanges. Lowering of key policy ratesand reserve requirements, quantitativeeasing measures, loan guarantees and

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stimulus packages are among theinitiatives taken by governmentsglobally.

2. Indian economy had begun toregain momentum with clear signs ofuptick in consumption and investmenttowards the end of Q3:2019-20, only tobe halted by COVID-19 that madegovernment enforce country-widelockdown in late March, 2020.

2.1 Index of Industrial Production(IIP) rebounded from negative growth inQ3:2019-20 to 2.1 per cent in January2020, and 4.5 per cent in February 2020,the highest level observed since July2019. Mining (10 per cent) andelectricity (8.1 per cent) led the positivegrowth. Within the use based segment,primary goods and intermediate goodscontinued to exhibit strong growth,while movement in consumer goodsremained tepid. Core index representingthe eight core industries witnessedhighest growth at 5.6 per cent inFebruary 2020, after March 2019. Fiveof the eight core industries registered apositive growth in output led byelectricity generation (11.0 per cent),coal (10.3 per cent) and cementproduction (8.6 per cent). On theexternal front, merchandize exportsshowed robust positive growth inFebruary 2020 at 2.9 per cent after a gapof 6 months. Exports of services alsoregistered a positive growth of 6.9 percent in February 2020 while importsgrew by 12.8 per cent. Inflationarypressures eased with CPI inflationdeclining from 7.6 per cent in January2020 to 6.6 per cent in February. Foodinflation (13.6 per cent) driven by onionprices in January 2020 also fell to 10.8per cent in February 2020. According toRBI's Consumer Confidence surveyconducted in the last week of February2020, consumer sentiment marginallyimproved to 85.6 in March 2020 fromthe all-time low of 83.7 in January 2020.

Business sentiment in Q4:2019-20 aspart of RBI’s Industrial Outlook Surveyalso saw improvement in production andorder books as compared to the previousquarter with positive sentiments onexternal demand.

Fig. 5: Growth Rate in Index of IndustrialProduction and Eight Core Industries

Data Source: Department for Promotion of Industryand Internal Trade, Ministry of Statistics andProgramme Implementation.

3. COVID-19 impact startedunfolding in India in March 2020:seven-day lockdown announced inresponse.

3.1 With COVID-19 strengtheningits global impact in March 2020, themonth in which its strike on India hadjust begun, business sentiment started toplummet. RBI’s quick survey onIndustrial Outlook of the ManufacturingSector conducted in second half ofMarch 2020 witnessed very sharpdeterioration in business sentimentsacross all sectors for Q4:2019-20; andstark pessimism for Q1:2020-21, whencompared to their assessment given inthe regular round of the survey (Jan-Mar2020). These sentiments got realizedwith export growth turning sharplynegative at (-) 34.6 per cent (YoY) inMarch 2020. All commodity groupsregistered negative export growth exceptfor iron ore which grew by 58.4 per cent.Oil meals (-70 per cent), meat, dairy &

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poultry (-45.5 per cent) and engineeringgoods (-42.3 per cent) experienced thelargest downward movement.Cumulative exports for FY 2019-20declined by 4.8 per cent (YoY) to USD314.3 billion. Cumulative imports forFY 2019-20 declined by 9.1 per cent(YoY) to USD 467.2 billion. Importsgrew negatively at (-)28.7 per cent (YoY)in March 2020, reflecting a weakeningof growth impulse within the countryand disruption of global supply chainfeeding into the country’s imports.Cumulative oil imports for FY 2019-20fell to USD 129.4 billion (-8.2 per cent),while non-oil imports declined at (-)9.5per cent to reach USD 337.8 billion.With these developments, merchandisetrade deficit for FY 2019-20 narrowed toUSD 152.9 billion as against a deficit ofUSD 184.0 billion in the previous year.

Fig. 6: Import of Petroleum crude &products and its share in total import

Data Source: Department of Commerce, Ministry ofCommerce & Industry.

3.2 India witnessed sharpcontractions in March 2020 both on theproduction and consumption side with aseven-day lockdown enforced in the lastweek of the month. Industrial productionsteeply contracted by 16.7 per cent(YoY) in March 2020 withmanufacturing shrinking sharply by 20.6

per cent (YoY). For FY 2019-20,industrial production declined by 0.7 percent compared to last year. Eight coreindustries also declined by 6.5 per cent(YoY) in March 2020, recording itssteepest fall since 2012. Constructionand manufacturing got disrupted with a24.7 per cent fall in cement productionand 13 per cent decline in steel output.Energy industries tracked domestic andglobal bearish trends. While productionof petroleum refinery products fell by0.4 per cent during the month,consumption of petroleum products fellmuch more by 17.8 per cent, the worstfall on record since 2004. Dieselconsumption was lower by 24.2 per centand petrol sales fell by 16.4 per cent.

Fig. 7: Production and consumption ofpetroleum products

Data Source: PPAC.Data on production for Apr-20 awaited.

3.3 The revival in electricitygeneration that had commenced fromJanuary 2020, turned around with asharp fall in power demand by 8.2 percent (YoY) in March 2020. COVID-19brought further bad news for the autosector, which was already battling acrisis before the outbreak. Sharp across-the board contraction in automobilesales was seen in March 2020, withgreatest decline in commercial vehicles

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(-88.1 per cent (YoY)) and passengercars (-53.3 per cent (YoY)). Thesedevelopments adversely impactedmarket confidence with growth inNIFTY-Consumption and Nifty-Automoving into negative territory in March2020.

Fig. 8: Growth of Auto sales, Nifty indices(YoY)

Data Source: Extracted from CMIE and NSE.

3.4 Lockdown induced supply chaindisruptions also negatively affectedinfrastructure industries with domesticair passenger volumes falling by 11.8per cent4 (YoY) in March 2020 withrailways freight traffic (-13.9 per cent)and port traffic (-5.2 per cent) alsodeclining sharply.

4. India’s economic activity(Manufacturing and Services) came tostandstill in April 2020 following thepreventive nationwide lockdown andresulted in supply side disruptions anddemand falling to unprecedented lows.

4.1 India’s Manufacturing PMI fellsharply from 51.8 in March 2020 to27.4 in April 2020. Record contractionsin output, new orders and employmentreflected a severe deterioration indemand conditions. Meanwhile, there

4 Data source: International Air TrafficAssociation (IATA)

was evidence of unprecedented supply-side disruption with input deliverytimes lengthening to the greatest extentduring lockdown.

4.2 India’s Services BusinessActivity Index gravitated to new lowsfrom 49.3 in March 2020 to 5.4 in April2020, with business activity falling atrecord lows, demand for servicescollapsing and excess capacity leadingsome firms to cut employment.

Fig. 9: PMI Manufacturing India and itscomponents

Data source: IHS Markit.

Fig. 10: PMI Services India and itscomponents

Data source: IHS Markit.

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4.3 Railways freight traffic declinedby 35.5 per cent (YoY) in April 2020,reflecting the laggard performance ofother input industries like cement, steel,power and coal. Cement traffic throughrailways fell drastically by 90.6 per centin April 2020 after declining by 26.3 percent in March 2020. While movement ofoutput like pig iron and finished steelfrom steel plants was down by 45.3 percent (YoY) in April 2020, movement ofinputs like coal and iron ore to steelplants was down 37.2 per cent and 32.1per cent respectively (YoY). Finishedsteel consumption also declined sharplyfor the second month with a (-) 90.9 percent (YoY) growth in April 2020.

Fig. 11: Growth in railways freight traffic ofmajor commodities (YoY)

Data Source: Directorate of Economics and Statistics,Ministry of Railways.

4.4 Even after partial easing ofCOVID-19 lockdown, power demandcontinued to decline for the secondmonth in April 2020, fallingsignificantly by 29.9 per cent5 (YoY).Negligible commercial and industrialactivity, along with the relatively cool

5 Power generation data for April 2020 sourcedfrom Brookings India Electricity and CarbonTracker, underlying data from MERIT, Ministryof Power.

weather during April this year weighedheavily on power demand. Coal IndiaLimited's (CIL) off-take of coal alsoplunged by 25.5 per cent (YoY) in April2020 to 39.1 million tonnes while CIL’scoal production declined by 10.9 percent (YoY) to 40.4 million tonnes.Limited activity in the thermal powersector in April 2020 is also corroboratedby a sharp 37.4 per cent fall in railwayfreight movement of coal for thermalplants. Incidentally, the capacity togenerate hydel power increased withCentral Water Commission’s datashowing doubling of water levels inlarge reservoirs in early May 2020 ascompared to the same month of theprevious year. This could possibly helpfill the vacuum in thermal powergeneration in the coming months. Withmost industries seeing a fall of railwayfreight traffic movement, eight coreindustries data of April 2020 is expectedto show a significant decline.

Fig. 12: Water reservoir levels

Data Source: Central Water Commission.

4.5 While railways freightmovement remained subdued, therewere indications of dry bulk tradeimproving with Baltic Cape Index, asreported by the Great Eastern ShippingCo. Ltd, India’s largest private shippingcompany, recovering significantly to674.0 in April 2020 after moving intonegative territory (-243.0) for the first

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time in February 2020 and March 2020(-222.0).

5. Agriculture and allied activitiesshowed continued resilience on theback of all-time highs in the productionof food grains and horticulture, withhuge buffer stocks of rice and wheatdespite facing COVID-19 inducedsupply chain disruptions.

5.1 The total production of food-grains during FY 2019-20 was estimatedat 295.7 million tonnes6 compared to285.2 million tonnes in FY 2018-19.Food-grain output in FY 2019-20 was25.9 million tonnes higher than theaverage production of food-grainsrecorded during the previous five years.

5.2 FY 2020-21 is also appearing tobe promising as pre-monsoon kharifsowing had progressed strongly by firstweek of May 2020, with acreage ofpaddy up by 37 per cent and that ofpulses, coarse cereals and oilseedshigher by 61 per cent, 66 per cent and 27per cent respectively, as compared toprevious season. The IndianMeteorological Department (IMD) hasforecasted a normal south west monsoonfor the 2020 season, with rainfallexpected to be 100 per cent of the longperiod average. The cumulative rainfallreceived for the country as a wholeduring the period 1st March, 2020 to29th April, 2020 has been 26 per centabove normal. These developments bodewell for agricultural production.However, subdued trends of ruraldemand emerged in March 2020 withtractor and fertilizer sales declining by49.9 per cent and 1.58 per centrespectively. But a sharp pickup infertiliser sales of 53.4 per cent waswitnessed in April 2020, auguring somehopes of rural demand recovery.

6 As per 3rd Advance Estimates, 2019-20 of D/oAgriculture, Cooperation and Farmers’ Welfare

5.3 Due to nationwide lockdownsince last week of March 2020,uncertainty in agricultural sectorregarding harvesting and procurementoperations along with labour shortagekept commodity arrivals and prices inwholesale markets volatile. Wheatprocurement under central pool,however, gathered momentum in April2020 with 130 Lakh Metric Tonnes (LMT)

Fig. 13: Growth in Tractor sales andFertiliser sales (YoY)

Data Source: Ministry of Chemicals and Fertilizers,Tractor Manufacturer association.

procured by the end of the month.Target of 400 LMT for the season islikely to be achieved. 2.61 LMT ofPulses and 3.17 LMT of oilseeds wasprocured under Rabi 2020-21 season till2nd May 2020. Amidst severe challengesof unloading of food grain stocks inCOVID-19 affected areas anddistribution of the same to states forsupply under PDS, railways freighttraffic movement of food-grainswitnessed a staggering 135.5 per centgrowth (YoY) in April 2020. FoodCorporation of India (FCI) moved 60LMT food grains in the month of April

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2020 surpassing the highest ever singlemonth movement of 38 LMT achievedduring March 2014 by 57 per cent. Withsteady inflows of food grains throughprocurement, the overall central poolstocks position remains stable afterrelease of about 122 LMT stocks (byend of April 2020) under variousschemes including National FoodSecurity Act and Pradhan Mantri GaribKalyan Ann Yojana.

6. Inflation was on decliningtrajectory reflecting weak demandpressures, and volatility in essentialcommodity prices remained due tosupply chain disruptions.

6.1 Based on data gathered only upto 19th March, 2020 due to lockdown,Consumer price inflation (CPI) showedsigns of price levels abating in March2020, decelerating for the third month ina row. Growth in aggregate CPI indexwas 70 bps lower at 5.9 per cent (YoY)in March 2020 as compared to 6.6 percent in February 2020. Food inflationalso declined to 8.8 per cent in March2020 (10.8 per cent in February 2020).

Fig. 14: Rates of Inflation

Data Source: MoSPI and DPIIT.

6.2 Decline of Wholesale priceinflation (WPI) to 1 per cent in March

2020 (2.26 per cent in February 2020)also reaffirmed weak demand pressure.Similar trend was also seen in CPI-AL(Agricultural Labour) and CPI-RL(Rural labour), which decreased from10.14 per cent and 9.84 per centrespectively in February 2020 to 8.98per cent and 8.69 per cent in February2020.

6.3 Daily data on 22 essential fooditems covered by the Department ofConsumer Affairs (DCA) suggests thataverage retail prices increased by 4.2 percent in April 2020 over March 2020.Price changes continued to remainvolatile owing to supply side constraintswith price of potato (15.1 per cent), atta(wheat) (4.4 per cent) and pulses (9.2per cent) having increased while onion(-10 per cent) prices declining sharply inApril 2020 over March 2020. Theseresults are visible in April 2020Consumer Food Price Inflation (CFPI)excluding meat and fish, increasing by1.7 percentage points from March 2020to 10.5 per cent in April 2020.Truncated data for WPI, howeversuggested food inflation easing to 3.6per cent in April 2020 as against 5.49per cent in March 2020.

6.4 Prices of non-subsidised LPGdeclined for three straight months with arecord Rs 162.50 per cylinder cut inprices at end of April 2020, in line withthe slump in benchmark internationalrates. Oil prices (Indian basket) declinedby 40 per cent from USD 33.36/bbl inMarch 2020 to USD 19.90/bbl in April2020.

6.5 The overall inflation outlookremains benign with economic inactivityleading to a broad-based deceleration inprice pressures, particularly energy.However, the supply chain constraintshave possibly acted on driving higherfood inflation in April 2020.

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7. Foreign Portfolio Investors(FPIs) continued to pull out fundsfrom capital markets in April 2020amid COVID stress and the rupeedepreciated further. However, rupeeoutperformed its emerging marketpeers, with a new found resilience inthe forex market.

7.1 Consequent to COVID-19outbreak, the surge in risk aversion ofinvestors triggered large capitaloutflows from emerging marketsincluding India. According to latestdepositories data, March 2020 witnessedthe largest-ever foreign portfoliooutflow of USD 15.2 billion. Net FPIoutflows declined in April 2020 andstood at USD 1.9 billion. Both equityand debt markets experienced netoutflows. Usually, FPI outflows promptdomestic mutual funds to embracefinancial stocks and become net buyersin the domestic equity market, whichwas the case in March. However, inApril, mutual funds also witnessedwithdrawals to the tune of Rs. 17,760crore in both equity and debt marketscombined. This may be attributed to theFranklin Templeton episode.

Fig. 15: Capital market flows (FPI, MF)

Data Source: Central Depository Services Limited(CDSL).

7.2 With FPIs exiting from Indianequities for consecutive three months,

the rupee was bound to be underpressure. Most emerging market (EM)currencies depreciated including theIndian rupee which depreciated from74.3 INR/USD in March 2020 to 76.2INR/USD in April 2020. Further theUSD, which is considered as the safestand most liquid currency in the world,appreciated by about 3 per cent fromJanuary 2020 to March 2020 againstmost currencies. However, the INRoutperformed most of the EM currencies.This may have been contributed byRBI’s presence in the forex market andpartly by improvement in externalsector fundamentals from lower crudeprices.

Fig. 16: EM currency movements* (Jan-Apr, 2020

Data source: IMF,https://www.exchangerates.org.uk/*appreciation (+)/depreciation (-)

Fig. 17: RBI’s net purchase/sale of USD

Data Source: RBI.

Purchase (+) , Sale (-)

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7.3 Global oil demand dropped to itslowest since 1995, at 29 million barrelsper day (mbpd), in April 2020,according to Energy InformationAdministration (EIA). Brent crude oilprice, after nearly halving betweenJanuary and March 2020, plunged to atwo-decade low of USD 18.7 per bbl inApril 2020. The Indian basket of crudeoil averaged only a bit higher at USD19.9 per bbl during the month.

7.4 Gold prices spiked by as muchas 8.3 per cent in the first 14 days ofApril 2020, riding on the yellow metal’ssafe haven appeal. Prices hoveredaround the USD 1,700 per troy ouncemark in the second fortnight of April2020, which was its highest valuation inthe last seven years. The gold rally hadstarted in May last year on fears of theglobal economy slowing down. Thistransformed into a more definiteexpectation of a global recession withCovid-19 pandemic hitting every cornerof the world.

8. India's external sectoracquired resilience manifest inimprovement in balance of paymentsposition, manageable current accountdeficit (CAD) and prudent externaldebt. India’s foreign exchangereserves continued to be robust andavailable to finance more than elevenmonths of imports. India’s currentaccount balance is expected to benear zero or even in small surplus inQ1:2020-21.

8.1 India's CAD narrowed to 0.2 percent of GDP in Q3:2019-20 from 2.7 percent in the same period a year ago on theback of lower trade deficit and rise innet service receipts. The narrowing isalso perceptible in April-Decemberperiod with CAD declining from 2.6percent of GDP in 2018-19 to 1 percentin 2019-20.

8.2 Private transfer receipts, mainlyrepresenting remittances by Indiansemployed overseas, increased to USD20.6 billion in Q3:2019-20, up by 9.0per cent from their level a year ago. Netexternal commercial borrowings (ECBs)stood at USD 3.2 billion in Q3:2019-20,2019 compared with USD 2 billion ayear earlier. Indian corporates turned toECBs as bond investors and traditionallenders became risk averse following thecollapse of the IL&FS group inSeptember 2018. This wascomplemented by benign globalfinancial conditions allowing cheap andeasy dollar funding.

8.3 Net Foreign Direct Investment(FDI) inflows rose from USD 1.98billion in February 2020 to USD 2.87billion in March 2020, resulting incumulative net inflows of USD 42.7billion during FY 2019-20 (April-March), up from USD 30.7 billion ayear ago.

8.4 Net FPI, however has challengedthe BoP as it witnessed a sharp outflowof USD 16.16 billion in March 2020from an inflow of USD 1.02 billion inFebruary 2020, resulting in cumulativenet outflow of USD 0.14 billion in FY2019-20, compared to net outflow ofUSD 0.62 billion last year.

8.5 During COVID-19 times, theexternal debt and its repayment burdenis a major challenge being faced bysome emerging market economies.However, India is not vulnerable on thiscount as its external debt to GDP ratiohas remained low at about 20 percentduring the last three years.India's external debt outstanding as on31st December, 2019 stood at USD563.9 billion (20.1 percent of GDP),compared to USD 543.1 billion (19.8percent of GDP) as on 31st March 2019.India’s key external debt vulnerabilityindicators as at end December, 2019

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have been low and range-boundcompared to March, 2019, with debtservice ratio at 6.4 per cent (35.3 percent), ratio of forex reserves to totalexternal debt at 81.5 per cent (7 per cent)and ratio of short-term debt to forexreserves at a manageable 23.2 per cent(146.5 per cent).

Fig. 18: India’s External debt

Data Source: DEA, M/o Finance.

8.6 Going by the IMF’s assessmentof ‘reserves adequacy’ emergingmarkets metric (ARA EM)7, a measurethat determines external debt servicingability, India’s ratio of reserves to ARAEM metric in 2019 stood at 157.98 percent, well above the safe range andmuch better than China (82.8 per cent),South Africa (73.2 per cent) and most ofits emerging market peers. Despitefacing massive sell offs in the equitymarket amid fear surrounding COVID-19, India’s foreign exchange reservescontinued to stand strong at USD 481.1billion with an import cover of more

7 The ARA EM metric comprises four componentsreflecting potential drains on the balance of payments: (i)export income to reflect the potential loss from a drop inexternal demand or a terms of trade shock; (ii) broad moneyto capture potential residents’ capital flight through theliquidation of their highly liquid domestic assets; (iii) short-term debt to reflect debt rollover risks; and, (iv) otherliabilities to reflect other portfolio outflows. The relativerisk weights for each component are based on the 10thpercentile of observed outflows from EMs during exchangemarket pressure episodes.8 Reserves in the range of 100-150 percent of the compositeARA metric are considered broadly adequate forprecautionary purposes.

than 11 months as on 1st May, 2020.Sharp decline in crude oil prices anddepressed domestic demand for goldimports may have nullified the impact ofFPI flight on reserves.

Fig. 19: India’s Forex reserves as percent ofIMF’s ARA EM metric

Data source: IMF.

8.7 India’s merchandise exportsexhibited a sharper negative growthfrom (-)34.6 per cent (YoY) in March2020 to (-)60.3 per cent in April 2020 toreach USD 10.36 billion. Merchandiseimports also registered a sharpernegative growth in April 2020 at (-)58.7per cent (YoY), as compared to (-)28.7per cent in March 2020 to reach USD17.12 billion. This yielded a fall inmerchandise trade deficit from USD 9.8billion in March 2020 to USD 6.8billion in April 2020.

Fig. 20: India’s merchandise trade balance

Data Source: Department of Commerce, Ministry ofCommerce & Industry.

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8.8 Coupled with a sharp decline inexport growth due to global slowdownand an even sharper decline in importgrowth due to suppressed domesticactivity, a surplus in current accountbalance is expected to emerge in Q4 ofFY 2019-20.

9. RBI’s sustained liquidityoperations flushed the Indian bankingsystem with liquidity in April 2020.However, banks’ response remainedlukewarm and credit to commercialsector continued to see muted growth.

9.1 Since the imposition oflockdown to fight COVID-19, the RBIhas been intervening in a calibratedmanner to ensure conducive financialconditions and normalcy in thefunctioning of the economy. RBIreduced the repo rate by 75 bps to 4.4per cent (27th March, 2020) and thereverse repo rate by 115 bps to 3.75 percent (17th April, 2020) to enable bettercredit flow to the financial market andeventually to small businesses. Apartfrom these, RBI has also undertakenseveral unconventional measures toensure adequate liquidity at the longerend of the yield curve. These includelong term repo operations (LTRO) andtargeted LTRO (TLTRO) to encourageflow of funds from banks to small andmid-sized corporates, Non-BankingFinancial Corporations (NBFCs) andMicro Finance Institutions (MFIs). RBIalso announced a special refinancingfacility for the rural sector. Further, on27th April, 2020, the RBI opened aspecial liquidity window of Rs. 500billion for mutual funds to alleviate theredemption pressure in the aftermath ofFranklin Templeton winding up six ofits debt funds. Since 6th February, 2020,RBI has infused liquidity amounting tomore than 3 per cent of GDP.

Fig. 21: Net liquidity injection (+)/absorption (-) by RBI

Data Source: RBI.

9.2 In response to policy rate cuts,the base lending rate as on 1st May, 2020,stands reduced to 8.15/9.40 per centfrom 8.95/9.40 per cent on thecorresponding day of the previous year.Banks have also reduced Marginal Costof Lending Rate (MCLR) to 7.10/7.50per cent from 8.05/8.50 per cent a yearago. Term deposit rate for above oneyear also stands reduced to 5.7/6.0 percent from 6.25/7.50 per cent.

9.3 As on 24th April 2020, growth ofM3 (Broad Money) increased to 10.7per cent (YoY), as compared to 10.0 percent a year ago with growth seen morein cash with the public and time depositsand a fall seen in demand deposits.These figures are suggestive of publicincreasingly accumulating cash inanticipation of emergencies.

9.4 On the credit front, banksshowed tepid response to RBI’s liquidityoperations and remained risk averse toon-lending. Bank credit growth recordeda 0.7 per cent decline in the fortnightending 24th April, 2020 compared to theprevious fortnight. On a YoY basis, itdecelerated sharply by almost half to 6.7per cent this year compared to 13.0 percent in the corresponding period lastyear. Bank credit to commercial sectoralso fell by 0.7 per cent in the fortnightending 24th April, 2020 compared to the

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previous fortnight, registering a sharpdecline in growth rate from 12.3 per cent(YoY) in 2019 to 6.8 per cent in 2020.Credit-deposit ratio eased to 74.9 as on24th April, 2020 from 75.4 per cent afortnight ago and 77.1 per cent a yearago, thereby further building liquiditysurplus in the banking system. Moreliquidity implies lower liquiditypremium and thereby lower cost ofcredit/yield and higher credit offtake.RBI’s sustained liquidity operationsaugur well for increasing credit offtakevia a lower liquidity premium for banks.However, risk premium by banks, whichis harder to target continues to remainhigh.

9.5 Banks’ investment in G-Secsaccelerated sharply to 14.1 per cent(YoY) as on 24th April 2020 from 9.1per cent a fortnight ago and 2.8 per centa year ago, leading to an investment-deposit ratio of 28.95 per cent, muchhigher than the Statutory Liquidity Ratio(SLR) of 18.0 per cent. The extent ofrisk aversion of banks was furtherreflected in banks parking a staggeringRs. 7.36 lakh crore under RBI’s safemode reverse repo window on 30th April,2020, despite an unattractive rate of 3.5per cent.

Fig. 22: Liquidity operations in RBI’sReverse Repo window

Data source: RBI.

10. Excess liquidity in the bankingsystem along with reverse repo cutweighed on bond markets leading tosteepening of yield curves in April 2020.

10.1 Despite sustained liquiditysurplus in the banking system, NBFCsand MFIs continued to face liquiditypressure as banks were reluctant to on-lend to them and considered it safer topark excess funds with RBI.

10.2 Surplus liquidity showed up indeclining of average daily turnover inthe call money market to Rs. 0.22 lakhcrore in April 2020, less than half of theaverage turnover of Rs. 0.47 lakh crorein March 2020. Consequently, theweighted average call rate (WACR)averaged closer to the reverse repo, at4.01 per cent in April 2020 whencompared to 4.94 per cent in March2020.

10.3 The steepening of yield curvefollowed with daily weighted averageyield on G-secs with one-year residualmaturity falling by 81 bps, 5-yearresidual maturity by 41 bps and 10 yearresidual maturity by 16 bps from 31stMarch, 2020 on 30th April, 2020.Subsequently, the RBI conductedspecial OMOs (buying long term papersand selling short term securities) asannounced on 27th April, 2020 to easethe elevated term premia. Consequently,RBI’s special OMO along withsecondary market debt auctions softened10-year G-Sec yields further to 5.73 percent on 8th May, 2020, reaching theirlowest since 2009. Typically, when theCentral Bank's stance of monetarypolicy is accommodative, as the RBI'scurrent stance is, the yield spread isexpected to be much lesser. However,yield on the 10-year G-Sec yield is still133 bps above the RBI's repo rate as on8th May, 2020.

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Fig. 23: Yield on Residual Maturity ofGovernment of India Dated Securities inSecondary Market

Data source: Clearing Corporation of India (CCIL)

10.4 In the corporate bond market,RBI’s TLTRO auctions combined withsurplus system liquidity to result in 43per cent increase in funds raised byIndian corporates from the primarymarket during April 2020 compared toMarch 2020. This may suggest that largecorporates are accessing liquidity fromthe market at lower cost.

Fig. 24: Primary corporate bond market

Data source: CMIE Prowess.

10.5 Yet, 10 year AAA corporatebond yields rose from 7.15 per cent on24th April, 2020 to 7.52 per cent on 30thApril, 2020 after Franklin TempletonMutual Fund voluntarily closed its sixdebt schemes citing redemption pressure.With RBI’s timely intervention of

opening a Rs 50,000 crore window formutual funds and regulatory benefits toall banks under Statutory LiquidityFacility - Mutual Funds (SLF-MF),corporate bond yields have eased to 7.2per cent as on 8th May, 2020.

Fig. 25: Benchmark bond yields

Data Source: FBIL, CMIE10.6 The credit spread howevercontinues to remain wide at more than100 bps in first week of May, 2020. Intimes of unquantifiable uncertaintybrought in by COVID pandemic, creditspreads may take a while to narrow.

11. Expansionary fiscal policy is oncourse in FY 2020-21 to mitigate theadverse economic impact of COVID-19,with increase in market borrowings byCentral and State governments. As onMay 1, 2020, while Centre raised 88per cent of its gross borrowings in thecorresponding period last year, Statesraised more than 1.7 times, both ongross and net basis.

11.1 For FY 2019-20, fiscal deficitwas budgeted at 3.3 per cent of GDP,which was revised to 3.8 per cent. Thiswas consistent with Centre’s net revenuereceipts growing by 8.9 per cent duringApril-February of FY 2020-21 over thecorresponding period of FY 2019-20,while total expenditure increased by12.6 per cent in this period to Rs. 24.7

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lakh crore. Revenue and capitalexpenditure grew by 12.8 per cent and11.4 per cent respectively during thisperiod. Growth in GST collectionsdeclined from 8.3 per cent (YoY) inFebruary 2020 to (-)8.4 per cent inMarch, 2020.

11.2 Central Government on 31stMarch, 2020 announced that it willborrow Rs. 4.88 trillion or 62.56 percent of the FY 2020-21 gross borrowingtarget in April-September, more thanhalf the budgeted amount half way intothe year. With RBI raising limits ofWays and Means Advances (WMA) forCentre and states in April 2020, theCentral government increased theutilization of this window to reach 56per cent of the limit as on 24th April,2020. State governments, however, onlyused up 2.1 per cent of the limitavailable, relying more on marketborrowings.11.3 Government of India inconsultation with RBI has revisedissuance calendar for marketable datedsecurities for the remaining period ofH1:2020-21 (11th May to 30th September,2020). In this period, Government plansto borrow 6 lakh crore as against itsoriginal plan (Rs. 4.88 lakh croreannounced on March 31). The estimatedgross market borrowings of the Centrein FY 2020-21 has been revised upwardsby 53.8 per cent to Rs. 12 lakh crore inplace of Rs.7.8 lakh crore as per BE2020-21, necessitated on account ofCOVID-19 pandemic.

11.4 In so far as actual borrowings inFY 2020-21 are concerned, Centre'sgross market borrowings picked up inthe week ending 1st May, 2020 to reachRs. 60,000 crore, 88 per cent of theamount borrowed in the correspondingperiod of last year. States continued tobe active borrowers in April 2020,raising more than 1.7 times both ongross and net basis compared to last year.

Fig. 26: Market borrowings of Government

Data Source: RBI

11.5 Yet, surplus liquidity in thebanking system resulted in 10-year G-Sec market yields falling by 29 bpsduring April 2020, although, they startedto rise in the second half of April 2020.

11.6 With RBI conducting specialOpen Market Operation (OMO)(purchase of long term and sale of shortterm G-Secs for Rs. 10,000 crore each)on 27th April, 2020 and secondarymarket debt auctions subsequently,yields eased by as much as 111 bps from6.84 per cent on 3rd April, 2020 to 5.73per cent as on 8 May, reaching theirlowest since 2009.

11.7 In April 2020, RBI alsointroduced a separate Fully AccessibleRoute (FAR) for investment by non-residents in specified G-Secs with suchsecurities attracting no foreign portfolioinvestor (FPI) limits until maturity.Overall FPI investment limit aspercentage of outstanding governmentstocks for FY 2020-21 was keptunchanged. With continuous selling inG-Secs by FPIs post emergence ofCOVID, general category FPI utilisationof investment limit in Central G-Secshas fallen to 55.2 per cent as on 30thApril, 2020, compared to the peaks of

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over 75 per cent at the beginning of2020.

12. Indian benchmark equityindices recorded largest gains in April2020 after plummeting in March 2020,buoyed by optimism over lockdowneasing in major global economies,stimulus packages by Central Banksand governments, expanding businessactivity in China and encouragingCOVID-19 drug trial results in the US.

12.1 Nifty 50 and Sensex recordedlarge gains in April 2020, helping themrecoup losses driven by the Covid-19outbreak. Nifty 50 and BSE Sensex roseby 14.7 per cent and 14.4 per cent(MoM) respectively in April 2020 aftera sharp decline of 23 per cent (MoM) inMarch 2020.

Fig. 27: Stock market movements

Data Source: RBI.

12.2 The surge in equity marketindices in April 2020 happened asequity markets tracked gains in globalpeers on optimism about a COVID-19drug to treat the pandemic that hasbrought the world to a standstill.Stimulus packages by Central Banks andgovernments across the globe and theUS Federal Reserve’s commitment to

aggressive monetary policy to revive theeconomy also boosted global marketsentiment. Government of Indiapermitted industries in green and orangezones to start operations from 20th April,2020 and gave its nod for functioning ofneighbourhood and standalone shopsfrom 25th April, 2020.

12.3 Sectoral indices also sustainedthe market gains in April 2020. Topgainers were drugs and pharmaceutical,petroleum products, automobile andmetals whose stocks yielded 20-30 percent returns during the month. Thelaggards were transport services,electricity, machinery and gems &jewellery which posted single-digitreturns.

13. IMF has projected India’s GDPgrowth at 1.9 per cent in FY 2020-21but Government is cognizant of therelative severity of lockdown oneconomic activity in the country and iscautiously optimistic about the signalsfrom Indian benchmark equity indices.

13.1 In February 2020, NationalStatistical Office had estimated realGDP growth for FY 2019-20 at 5.0per cent and this was before COVID-19made its presence felt in India. The lastweek of March 2020 was, however,clearly a COVID-19 impacted month asIndia closed FY 2019-20 with alockdown of one week. This guidedIMF’s downward revision of India’sGDP growth estimates of FY 2019-20 to4.2 per cent in its WEO statement ofApril 2020.

13.2 For FY 2020-21, the EconomicSurvey in January, 2020 projectedIndia’s GDP growth at 6-6.5 per cent.However, WEO of April, 2020, afterfactoring in the COVID-19 impact, hasprojected India’s GDP in FY 2020-21 at1.9 per cent.

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13.3 Within the global downturn,India is among the handful of countriesthat is projected by IMF to have positivegrowth in FY 2020-21. In fact, India’sgrowth is the highest estimated growthby IMF for FY 2020-21 among G-20economies, with the country expectedto post a sharp turnaround and resumeits pre-COVID trajectory by growing at7.4 per cent in FY 2021-22.

13.4 These are still early days in FY2020-21 and COVID-19 is yet to abatein India. The country’s actual GDPgrowth in FY 2020-21 will becontingent upon the intensity, spreadand duration of the COVID-19pandemic within national territory. Onthe external front, downside risks to

India’s growth emerge from the highpossibility of global slowdowndeepening and supply chain disruptionsgetting exacerbated due to prolongedspread of COVID-19 and lockdownsacross countries.

13.5 As India continues to tackle thehealth crisis unleashed by the COVIDpandemic, the focus has now shifted torevive the economy which has beendebilitated by the lockdown.Government of India and RBI areworking towards implementingsubstantial targeted fiscal and monetarymeasures to support affected sectors ofthe economy.

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For any queries, you may contact the team:

1. Shri Rajiv Mishra, Economic Adviser (E-mail: r.mishra67@gov.in)2. Ms. Tulsipriya Rajkumari, Deputy Director (E-mail: tulsipriya.rk@nic.in)3. Ms. Sanjana Kadyan, Assistant Director (E-mail: sanjana.kadyan@gov.in)4. Shri Manoj Kumar Mishra, Assistant Director (E-mail: manojkr.mishra@gov.in)5. Shri Pradyut Kumar Pyne, Economic Officer (E-mail: pradyut.pyne@nic.in)6. Shri Narendra Jena, Economic Officer (E-mail: jena.narendra@nic.in)